Several times each day the Coleman Report drops into my inbox. It’s a collection of small business banking articles that give readers a pretty clear picture of what’s happening in the world of small business lending. This morning, an article published by TIME, but featured in the Coleman Report caught my attention: Let’s Stop Praising Small Business—and Fund More, by Gary Belsky. I couldn’t agree with Mr. Belsky more.

We’ve heard a lot over the last several months of the Presidential Campaign about how important small business is to the economy. However, when politicians speak, I’m not sure they’re saying what we’re hearing. In fact, Belsky does a great job of outlining what most of the politicians are calling small business.

“[A]s much as politicians glorify entrepreneurs, it’s unclear how crucial they are when it comes to job creation. For that matter, it’s a little unclear what we’re talking about when we talk about small business. Because one entrepreneur’s small business is another’s gigantic competitor. According to the SBA, for example, a small business is defined in one of the following ways, depending on the industry:

Annual revenues of $750,000 or less for most agricultural industries

$33.5 million or less for heavy construction industries

$14 million or less for specialty trade contractors

500 employees or fewer for most manufacturing and mining industries

100 employees or fewer for wholesale trade industries

$7 million or less for most retail and service industries

“That’s a wide range of definitions, especially given the way politicians and Chamber of Commerce types like to portray entrepreneurs as an urban version of the family farmer. In fact, even the SBA’s small-business loan data is based on a sort of proxy measure. The agency defines a loan to small business as any business loan of $1 million or less. So a $1.1 million loan to a chain of dry cleaners with $5 million in revenues doesn’t get counted, while a $500,000 loan to a 150-worker auto parts wholesaler does.”

Is there any wonder why it’s so hard for anyone, including small business owners, to understand what the Presidential candidates are talking about?

I’ve spent my career working in small businesses. I started driving the delivery truck and working in the warehouse for my Dad’s small industrial supply business as a teenager, what I think most people in the U.S. would consider a small business. I also spent several years in the marketing department of a software company with over 200 employees and revenues in the $10s of millions. I have to admit, it didn’t feel like a small business, but it certainly was by the SBA’s definition.

I imagine that over the coming months as November looms larger, we’re going to hear a lot about how important small business is to this candidate or that candidate, but I doubt we’ll hear anything about what they’ll do for the small businesses you and I identify with on Main Street. What’s more, most bankers want a credit score of 720 or better, three or four years in business, and a fat savings account before they’re willing to take a risk on a small business loan. “If I had that I wouldn’t need a loan!” I sometimes heard my father say in a phone conversation with his banker.

“The real Little Engine That Could when it comes to job creation, as show in a 2010 study from the National Bureau of Economic Research—‘Who Creates Jobs? Small vs. Large vs. Young’—is new companies, regardless of their size,” writes Belsky. “As the authors (John Haltiwanger, Ron Jarmin, Javier Miranda) concluded: ‘Firm startups account for only 3% of employment but almost 20% of gross job creation. The fastest growing continuing firms are young firms under the age of five.'”

I find it ironic, from a banking perspective; the very fountain of job creation (politicians on both sides of the aisle claim they want to promote) fail to qualify for a small business loan at most banks. I have to ask, how do we create an environment where start-ups can thrive (and sometimes fail or struggle), while creating jobs (which is what they do best), and successful startups can blossom into thriving enterprises?

“When politicians criticize government for small-business-strangling regulation, they’re being disingenuous.” continues Belsky. “Most small businesses fail to grow because that’s the nature of the beast. What you want, from a job-creation perspective, is government to foster an environment in which starting a business—period—is easy. It’s a numbers game really; since most small business will fail or stall, you want to throw as many ideas on the pavement as possible so that the small percentage of start-ups that thrive is part of an increasing pool of new companies. The success rate may not change, but the absolute number of successes will.”

I recognize that there is no simple answer to the financing needs Main Street businesses face every day, but it’s long past time for politicians (both red and blue) to come to the table with ideas that will help the very entrepreneurs that are the most likely to really create jobs (and they aren’t all sexy SaaS software companies either).

“Rather than arguing over who’s more supportive of existing small-business owners—or harping on regulations, which are not the problem; or worrying about weak borrowing, which is most likely a cyclical phenomenon—both candidates should explain how they’d help wannabe entrepreneurs take the big leap. Because the more of those folks we can guide from fantasy to reality, the more jobs we’ll create down the line,” says Belsky.

Comments

This article hits the proverbial nail on the head. I have experienced exactly what your father did. It is quite frustrating. I also belong to several minority chambers of commerce, and almost every meeting, they trot out some government sponsored small business lending expert proclaiming “we’re lending money”, only to find that “sorry, you don’t meet our perameters” I have written the White House about this very topic, and got some generic response saying how they realize that small businesses are the bakbone of the economy blah, blah, blah…We need to hold both parties accountable.

The FIRST thing that needs to be done is to get the GOVERNMENT out of business! They know NOTHING about businesses yet they regulate everything. 2nd, banking regs need to be lightened & get government out of THAT too, as it was years ago – a LOCAL buisness went to a LOCAL bank to do their business – loans, help, checking, savings – all stayed pretty local. THEN we need to get healthcare SIMPLIFIED & govt out of that, too. NO business should be forced to provide healthcare or specific types. That’s a business decision that should be a barganing chip to employees not something that is a given. Then, we need tort reform since that’s a HUGE cost for businesses AND the economy. Then, we need to be allowed to hire & fire as we need to. No quotas, no big brother over the shoulder making sure we hire a certain type person, but allowed to hire the best for the company. THEN you will see this economy explode & continue to grow & the country be prosperous & all will benefit. The whole world will see, will mimic or be envious…

I am concerned about the future of small business for the fact that free enterprise is becoming a narrow market. I am a small business owner of a roll your own tobacco retail establishmet and I have been working on opening my business for the last year. I have only been open 4 months and the federal government outlawed our cigarette rolling machines. Stating that we were manufacturing cigarettes without a federal permit , which they don’t even offer us. In return we lost about 75% of our business. Where is the free enterprise in that. Because of the law, thousands of these stores shut down. Where is the free enterprise in that. We have petitioned, emailed congress to appeal this law and haven’t even gotten a response. I agree, we definetly need to get the government out of our lives. They have missed managed absoutely everything they have touched and we are forced to pay for their mistakes. Instead of creating jobs , now they are just destroying them by kicking the small business owners in the gut. I don’t have the option to file for unemployement because I have been self-employeed for the last 15 years. So what choice do a lot of us have. The banks will not help bail you out only the big business.

I’m sorry every body I was not thinking about starting a fire storm, but did want people to know what happens when people lie and cheat.Again we are not closing are doors I’m not laying any body off ‘better to keep my mouth shut, What I realy wanted to do was to let people now what could happen again I’m sorry poor choice off words my target was for a group out west . To those who are depending on GOURMET we will always be here.Sorry Brend I love you.

California loans made pursuant to the California Financing Law, Division 9 (commencing with Section 22000) of the Finance Code. All such loans made through Lendio Partners, LLC, a wholly-owned subsidiary of Lendio, Inc. and a licensed finance lender/broker, California Financing Law License No. 60DBO-44694.